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Financial Analysis of Coca Cola Company vs PepsiCo
Coke vs pepsi economics
The role of accounting in financial management
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Final Project: Financial Analysis
The best way to determine whether to invest in a company is by reviewing the financial statements of the company. The purpose of this paper is to do a financial analysis and discuss the annual reports for two of the major beverage companies, PepsiCo, Inc. and the Coca-Cola Company, particularly the Consolidated Statements of Income and the Balance Sheets for each company. Both PepsiCo, Inc. and the Coca-Cola Company manufacture and sell bottled water, energy drinks, bottles teas, and soft drinks around the world. There have been many companies over the years that have entered the soft drink beverage industry, but PepsiCo, Inc. and the Coca-Cola Company continue to dominate as leaders in this industry. Many of their beverage products are sold in dine-in and carry-out restaurants.
It is of utmost importance when operating a company or business that all financial statements are accurate. Accurate financial data is needed to get a good picture of how the company is handling its revenue and show how well the company has done in the past. This information is helpful to managers running the company, to investors that may invest in the company, and to creditors who may extend credit to the company. The financial information is also helpful in the company acquiring revenue in the future.
PepsiCo, Inc., best known for its top selling cola, Pepsi, and the Coca-Cola Company, best known for its popular soda, Coke, has dominated the top spots in the beverage industry for decades in the domestic market and also in the international market. Both companies sell their products worldwide.
They have strategically followed a business plan that has kept them on top and created a gap between their company and other c...
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...companies experienced in 2005 lower net profits than they did in the previous year of 2004, and they both also showed an increase in operating expenses, resulting in lower net profits. They both showed higher operating expenses in 2005 compared to 2004 and should modify or adjust their operations to help reduce expenses so that their profit margins will begin to increase.
I have financially analyzed PepsiCo, Inc. and the Coca-Cola Company in this final paper. Both companies have been around for many years and have dominated the beverage industry market. The vertical analysis and the horizontal analysis for each company has revealed different financial pictures for each company. Each company had a time of financial profit and a time of financial loss.
References
Weygandt, J., Kimmel, P., & Kieso, D. (2008). Financial Accounting. Hoboken, NJ: Wiley.
At the end of 1991, PepsiCo had EBITDA of $2.1 billion or operating profit margin of 10.8% - down from profit margins of 12.2% and 11.7% in 1990 and 1989, respectively. In addition, net sales only grew by 10.1% in 1991 – considerably low versus growth of 16.8% and 21.6% in 1990 and 1989, respectively. Recent acquisitions of Taco Bell franchises in 1988, bottling operations in 1989, Smiths Crisps Ltd. and Walkers Crisps Holding Ltd. in 1989, and Sabritas S.A. de C.V. in 1990 aided sales in growth in 1989 and 1990. Additionally, a joint venture with the Thomas J. Lipton Co. in 1991 to develop and market new tea-based beverages may lead to greater sales in the future. However, there is some need for an immediate return on its investments in order to sustain historical revenue growth and increase the current profit margins.
Coke continuously out-stands Pepsi, even though they share a very similar taste and colour, however Coke should not be the drink that receives all the love and attention for what it offers. Despite their similar soda colour, the drinks actually contain some different ingredients, which produce a different taste, and affect the body differently. Furthermore, the way the companies markets their drinks makes a huge contribution to how successful their products will become. The major element for success however stems from their impact on society and how the companies utilize their social power to evolve. The two major soda companies are constantly head to head with one another, yet it is what they do that sets them apart.
Therefore, the long-term brand of Coca cola and better pricing strategies would help in competing with Pepsi. Unlike, Pepsi, Coca cola had targeted entering into partnership and alliances with local distributors and firms. This helps to develop strong relationship within the domestic firms to reduce the domestic barriers and thus, enhance the company’s competitiveness (Thabet, 2015). Lastly, the Asian markets consist of related and supporting industries to the soft drink industry that helps the companies in gaining a strong competitive position in the markets. Based on the competitive advantage of nation’s model, Coca cola has more home based advantages to develop a competitive advantage in relation to other countries on a global
Analysis of the Coca-Cola Company The Coca-Cola Company is the world's leading manufacturer, marketer and distributor of soft-drink concentrates and syrups. The Coca-Cola Company is the world's leading manufacturer, marketer and distributor of soft-drink concentrates and syrups. The Company markets many of the world's top soft drink brands, including Coca-Cola, Diet Coke, Sprite and Fanta. Through the world's largest and most pervasive distribution system, consumers in nearly 200 countries enjoy the Company's products at a rate of more than one billion serving a day.
Walk down the snack or beverage aisles of any grocery store and one would discover many of the products on the shelves are produced by PepsiCo. In 1965 Herman W. Lay and Donald Kendell of the Frito-Lay Company and Pepsi-Cola teamed up to form PepsiCo. The operations combined in 1986 under PepsiCo Worldwide Foods and PepsiCo Worldwide Beverages. Merging with Quaker Oats in 2001, PepsiCo became a $25 billion company (Friesner, 2012). What are some things PepsiCo does to consistently and stay towards the top of the food and beverage industry? By examining PepsiCo's marketing mix, organizational structure, social responsibility, use of technology and financials that question can be answered.
Control of market share is the key issue in this case study. The situation is both Coke and Pepsi are trying to gain market share in this beverage market, which is valued at over $30 billion a year. Just how is this done in such a competitive market is the underlying issue. The facts are that each company is coming up with new products and ideas in order to increase their market share.
There is little doubt that the most spirited and intense competition in the beverage world is between Coca-Cola and Pepsi Co., the two main players in the carbonated soft drink (CSD) production market. The competition between the two giants has benefited not only the consumers but also the companies. By checking and challenging each other in the market, the competition has lead to improvement and diversification of products and has forced each company to be creative and innovative. Throughout time, both companies have employed a number of diverse strategies to differentiate their products and to gain market share. Each successful tactic by one company would be copied by the opponent almost in the same manner or countered in a different fashion. As the CSD market has become more consolidated and saturated and as consumer demand and taste has changed, both companies shifted their attention to emerging nations and other major international markets as well as on other areas where they could grow their businesses (e.g. non-cola beverages and snack foods).
Pepsi and Coca-Cola are both sodas, but they differ in terms of the satisfying flavors, the color and the graphic design that represents their two products, and then how Coke makes more money than Pepsi. With that said, you should have gotten the ideology of what we will go further in discussing about. Everybody loves these two very well-known sodas which can inject caffeine into you, which makes you all jittery in filling you up with an energetic energy. Alright, enough of this, let's go straight in-depth in talking about the two rivals throughout this paper of how Pepsi beats Coke in sales, but Coke is usually ahead when it comes to annual net income (Feigin) or how Pepsi is a sweeter brand compared to Coke, though Coke brand is more valuable
Without a doubt, no beverage company compares to Coca-Cola’s social popularity or brand notoriety. Some people buy coke, not only because of its taste, but because it is also the most socially accepted brand. Another strength that is very important to Coca-Cola is customer loyalty. For instance, in a household where parents are avid Coke drinkers, this will be passed down to their children. Customers will continuously but Coke.
Pepsi Company – An Overview OVERIVEW PepsiCo is a world leader in convenient foods and beverages, with revenues of about $25 billion and over 142,000 employees. The company consists of the snack businesses of Frito-Lay North America and Frito-Lay International; the beverage businesses of Pepsi-Cola North America, Gatorade/Tropicana North America and PepsiCo Beverages International; and Quaker Foods North America, manufacturer and marketer of ready-to-eat cereals and other food products. PepsiCo brands are available in nearly 200 countries and territories. Many of PepsiCo's brand names are over 100-years-old, but the corporation is relatively young. PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay.
The ultimate motive of the event is to grasp the customers’ purchasing power by lowering its products’ prices after specifications development. Previously, I learned that Pepsi products revolve around consumer’s perception value in respect to Coca-Cola pricing strategy. The Pepsi marketing strategy does not focus on eliminating the dominant Coca-Cola drinks. Instead, they adjust their prices competitively to offer cheaper cold drinks with a refreshing feel than the other brands. Pepsi has taken the advantage of increased costs of drink production, which many companies could not afford to lower their prices. As a surviving tool, PepsiCo has diversified its products and competitively lowered its prices with standard tasty drinks. Moreover, its strategy to merge with Wal-Mart made the Pepsi Company to maintain the competitive prices in the drinks industry. The Company maintains current prices by strategically cutting down the production and operation costs in the product
The project is on Asset Management in coca cola, strained from annual reports of the company. The subject matter is partial to Asset Management, its scrutiny and its performance valuation but not to any other areas of accounting, corporate, marketing and financial matters.
The purpose of this report is to compare financial reports from the two largest soft drink manufacturers in the world. The Pepsi Co. and Coca Cola have been the industry's leaders in their market since the early 1900's. I will use relevant figures to determine profitability, and break down key ratios in profitability, liquidity, and solvency. By breaking down financial statements, and converting them to percentages and ratios, comparisons can be made between competitors regardless of size.
These accounting information are so much important for the business owner or financial statements reader to analyze the company and make the economics decision.
The case study "Cola Wars Continue: Coke and Pepsi in the Twenty-First Century" focuses on describing Coke and Pepsi within the CSD industry by providing detailed statements about the companies’ accounts and strategies to increase their market share. Furthermore, the case also focuses on the Coke vs. Pepsi products which target similar groups of customers, and how these companies have had and still have great reputation and continue to take risks due to their high capital. This analysis of the Cola Wars Continue case study will focus mainly on the profitability of the industry by carefully considering and analyzing the below questions. Why is the soft drink industry so profitable? Compare the economics of the concentrate business to the bottling business: Why is the profitability so different?